﻿The previous forecast had tipped growth as much as 3.5 per cent by June next year.

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"Most of this revision to the outlook is accounted for by a change in the profile for mining investment which is now forecast to peak a little earlier and at a lower level than had been earlier expected," the RBA says.

"This change reflects the reappraisal of spending plans in the coal and iron ore sectors as well as a reassessment of the profile for spending on some large and complex LNG projects."

The RBA also warned that the outlook for growth is "sensitive to prospects for mining investment and the timing and extent of the anticipated recovery."

However, the Reserve Bank believes mining exports are still forecast to "grow substantially" given the increased capacity from the current pipeline of investments.

The RBA's statement sees inflation forecasts largely unchanged with underlying inflation expected to be close to 2.5 per cent over the next year.

Headline inflation could rise above 3 per cent by the first half of 2013 through the combined impact of the carbon price and volatility in fruit and vegetable prices.

The Reserve Bank also highlighted the looming "fiscal cliff" in the United States as a key risk to the global economy.

In a special section of the statement, the RBA said the automatic triggering of spending cuts and tax increases "would be the largest reduction in the federal budget deficit in a single year since 1969."

"Such a rapid fiscal reduction would result in annual average growth in the United States 3 to 4 percentage points lower than otherwise in 2013."

The Reserve Bank believes the threat of such a significant contraction, leading to a recession, means policy makers will ensure it won't proceed to its full extent.

However, the RBA has signalled that legislative agreement between Republicans and Democrats "will require agreement" to minimise the impact of the fiscal cliff.

The RBA has also downgraded its outlook for global growth to 3.25 per cent in both 2012 and 2013.

The "fiscal cliff" aside, the RBA has noted growth "at a moderate pace" in the United States and signs that China has stabilised.

The Reserve Bank noted that Australia's cash rate remains appropriate after leaving rates unchanged at 3.25 per cent on Tuesday.

The Australian dollar fell to a low of 103.78 US cents after the statement was released to financial markets after reaching a high earlier in the day of 104.45 US cents.

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About Peter Ryan

is the Australian Broadcasting Corporation's Business Editor, contributing to a range of ABC News programs including the flagship radio current affairs program AM and ABC News 24. Peter developed ABC business programs including Lateline Business and Business Today. He was the ABC's Washington Bureau Chief in the 1990s and has served in management positions including Head of TV News & Current Affairs in Melbourne.